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November 18, 2017

Entrepreneurs Should Leverage Relationships to Raise Capital

One of the most important assets that entrepreneurs have while building a company is their network. Relationships are critical to making things happen in a variety of growth stages. In the earliest days of launching a company, entrepreneurs perform customer development research to figure out there is a big enough pain point for their idea to solve. Many of those earlier conversations are with people whom they know.

When it comes time to raising capital, certain relationships are critical. Early rounds of capital come from family and friends. They want to see you succeed so some will invest in you more than just the business itself. As you start to grow, entrepreneurs usually need capital from professional investors. An entrepreneur's network is critical at this point to get introduction to angel investors or venture capitalists.

Relationships are critical for the deals that investors see. Most deals that they fund come from their own network. So entrepreneurs need to find ways to get connected to investors through their network. Entrepreneurs should spend a good amount of time in the earlier days building a variety of relationships that can lead to investor introductions. Or entrepreneurs can focus on building relationships with investors as well.

As a firm continues to grow, entrepreneurs' networks will become extremely valuable for customers, partners, employees, etc. Entrepreneurs should continually build relationships. In fact, having a few key relationships of people who can make lots of connections is extremely valuable. That way, entrepreneurs only need to focus on a few key relationships versus trying to build all of the relationships that they need on their own.